Towards Economic and Monetary Union
The adoption of the 1988 Directive was greeted with relief by the Commission. It had been a major accomplishment to agree on the obligation for all member states to completely liberalize capital movements. In the course of the following two years the remaining restrictions on short-term capital flows in Denmark, France and Italy were removed and the dual exchange market, operated in the Belgium-Luxembourg monetary union, was abolished. These steps were often taken at an earlier date than was called for under the directive. But also the countries which had been granted longer transitional periods generally moved forward in a decisive manner. In the negotiations the latter had been dragging their feet. But the momentum created by the adoption and implementation of the directive set spurs to the authorities. In doing so, they could profit from the generally favourable economic climate in Europe and the absence of expectations of major exchange rate adjustments. But there was also an important political consideration: they did not wish to miss the connection with the other EC members. There was a clearcut move towards full liberalization within the Community and all countries wanted to be part of this.
KeywordsExchange Rate Interest Rate Member State Monetary Policy Central Bank
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- 8.Banco de Portugal, Annual Report 1991, p. 87.Google Scholar